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Aztec: Expensive growth

Apr 10, 2001

Aztech has posted a whopping 476% growth in topline for FY01 compared to FY00. The rise in net profits is 390%. The astronomical figures are due to the low revenue base of the company. The growth has been at the sacrifice of almost 1000 basis points in the operating margins. The company has incurred additional costs of sales commissions and onsite consultancy charges for FY01 which were not there in FY00. This has added about 30% (of revenues) to the expenses. Aztec has controlled cost on other front like the employee costs for FY01 have come down to 16% from 25% in FY00. Also the subcontractor costs have been cut to almost half (as a percentage of revenues) by the company.

(Rs m) 3QFY01 4QFY01 Change FY00 FY01 Change
Sales 224 245 9.7% 137 789 476.1%
Other Income 8 3 -66.2% 1 11 1212.5%
Expenditure 166 179 8.0% 84 568 572.7%
Operating Profit (EBDIT) 58 66 14.8% 53 221 320.8%
Operating Profit Margin (%) 25.7% 26.9%   38% 28%  
Interest 1 1 0 1 5 264.3%
Depreciation 7 7 0 10 23 116.3%
Profit before Tax 57 60 0 42 204 391.1%
Tax 2 0 -1 0 2 475.0%
Profit after Tax/(Loss) 55 60 0 41 202 390.3%
Net profit margin (%) 24.8% 24.5%   30% 26%  
Diluted number of shares 40.4 40.4   40.4 40.4 0.0%
Diluted Earnings per share* 5.5 6.0 8.5% 1.0 5.0 390.3%
P/E (X) 10.8 9.9   58.0 11.8  

The companies QoQ growth figures for 4QFY01 are low compared to 3QFY01 growth figures. The company has registered a revenues growth of just 9.7% compared to 23% in 3QFY01. However, the operating margins have improved slightly on a sequential basis. The YoY growth figures for 4QFY01 compared to 4QFY00 are 208% growth in topline and 109% growth in bottomline.

At a current market price of Rs 59, the stock is trading at a P/E multiple of 12 times if FY01 earnings.

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